On March 23, 2017, City Council approved Agreement No. LW7-953-3735 with Arthur J. Gallagher Risk Management Services, Inc., for insurance broker services. Arthur J. Gallagher Risk Management Services, Inc., acts as the Insurance Broker of Record for the City of Chandler’s workers’ compensation, casualty/liability, property, and automobile insurance coverage. They also advise and coordinate with the City’s Risk Services Coordinator and City Attorney to obtain bids from insurers and negotiate the best terms and coverage for the various exposure areas. The City self-insures and carries excess coverage in the areas and at the levels indicated below. The total premium cost of recommended coverage through commercial carriers for FY 2021-22 is estimated at $2,308,258, compared to FY 2020-21 which was $1,392,451. The estimated increase in rate premium is due to the instability in the marketplace which is explained further in this memorandum. Excess Workers’ Compensation: Excess Workers’ Compensation Insurance is carried through Safety National. In FY 20-21 the City was self-insured for the first $2,250,000 for Police and Fire, and $750,000 for the remainder of the City employees. For the 2021 renewal, the City’s insurance broker submitted our account to Safety National, Arch, and Midwest Employers. We received declinations from all carriers except Safety National (current carrier). The reasons cited for the declinations are the City’s loss history and the strengthening of presumptive injury laws. Safety National provided a renewal quote with a 10% increase in premium. This increase is being driven by two recent fatality claims and a continued frequency and severity of claims on the police side as well as increasing medical costs. Safety National increased the police and fire retention from $2,250,000 to $3,000,000 and for the remainder of the City employees increased retention from $750,000 to $1,000,000. In addition, an SIR for Wildland Firefighters was added. This SIR would cover firefighters who were injured fighting a wildland fire. This SIR has no impact on the premium. Property Insurance: Property Insurance is carried through The Travelers Indemnity Company which provides broad coverage for buildings, business personal property, fine arts, Electronic Data Processing (EDP), mobile equipment, as well as boilers and machinery. This policy has various deductibles including $50,000 per occurrence for most losses, $100,000 for earth movement, and $50,000 for flood. Premium for FY 2021-22 is $519,979. Premium for FY 2020-21 was $479,008. Due to the catastrophic losses that have continued to occur in the U.S. as well as internationally, the property market has hardened. As a result of the hard market, Travelers Insurance Company, who had written the City's property and Auto Physical Damage (ADP) policy up to FY 2019/2020, will no longer write the City’s ADP and equipment. The City has been unable to find a carrier that will write over the road coverage for ADP and equipment that is licensed for road use. The City continues to self-insure all City owned autos and equipment until a carrier is willing to write over the road coverage., Excess Liability Coverage: Excess Liability Coverage is carried through Gemini and Hudson in $5 million increments. Allied World and Great American in $10 million increments for a total of $30 million excess liability coverage for FY 2021-22. In FY 2020-21 the City had excess liability coverage through Argonaut, Allied World, and Great American in $10 million increments.
- $5 million excess of $2,000,000 Self-Insured Retention – Insurance is carried through Gemini Insurance Company Premium for FY 2021-22 is $417,960. New Insurance carrier replacing Argonaut Insurance Company*. Premium FY 2021-22 is $417,960. Premium for FY 2020-21 $317,788.
- $5 million excess of $7,000,000 – Insurance is through Hudson. New insurance carrier replacing Argonaut Insurance Company*. Premium FY 2021-22 is $250,000.
- $10 million excess of $12,000,000 – Insurance is through Allied World, Premium for FY 2021-22 is $370,000. Premium for FY 2020-21 $69,843.
- $10 million excess of $22,000,000 – Insurance is through Great American Assurance Co. Premium for FY 2021-2022 is $206,000. Premium for FY 2020-21 was $50,000.
*Argonaut very recently lost its reinsurance to the surprise of the market, which means it cut its capacity to write our primary liability coverage. The broker had to restructure the City’s primary layer of $10 million into two carriers each taking $5 million. Crime Insurance: Crime Insurance is carried through National Union Fire Insurance Co. of Pittsburgh, PA. Coverage includes state required bonds for the City’s Management Services Director and Accounting Manager. This policy also provides coverage for members of the City’s boards and commissions. Premium for FY 2021-22 is $15,462. Premium for FY 2020-21 was $13,992. Privacy/Security Liability Insurance (Cyber Insurance): Privacy/Security Liability Insurance also known as Cyber Insurance is carried through Cowbell Insurance Co. Privacy and Network Liability policy provides $5 million aggregate for Privacy, Network Security, Internet Media, Network Extortion and Cyber Incident Response. In FY 2020-21 the City had Privacy/Security Liability through Ace Group that provided a $10 million aggregate policy. Premium for FY 2021-22 is $98,885. Premium for FY 2020-21 was $101,908. Storage Tank Liability Insurance: Storage Tank Liability Insurance is carried through Mid-Continent. Policy limits remain at $1,000,000 per tank, with a $25,000 per incident deductible. Coverage complies with the financial responsibility mandates of the Environmental Protection Agency. Premium for FY 2021-22 is $1,639. Premium for FY 2020-21 was $1,639. Airport Liability Insurance: Airport Liability Insurance is carried through ACE Property & Casualty. Airport Owners and Operators Liability policy provides $50 million in coverage per occurrence. Premium for FY 2021-22 is $11,485. Premium for FY 2020-21 was $11,485. Fine Arts Insurance: Fine Arts Insurance is carried through Axis Insurance Company. This is purchased to cover the City’s museum collection and temporary loans. Deductible per occurrence is $1,000. Premium for FY 2021-22 is $8,820. Premium for FY 2020-21 was $8,820. FINANCIAL IMPLICATIONS: Funds for premiums are budgeted for payment from the following accounts:
Account Number |
Fund Name |
Program Name |
CIP Funded |
Proposed Renewal Premiums FY 2021-22 |
Premiums FY 2020-21 |
736.1250.0000.5620 |
Worker's Compensation |
Excess Insurance |
N/A |
$ 381,028 |
$ 349,467 |
737.1310.0000.5610 |
Insured Liability |
Fire Insurance |
N/A |
$ 519,979 |
$ 479,008 |
737.1310.0000.5614 |
Insured Liability |
Public Liability |
N/A |
$1,243,960* |
$ 437,631 |
737.1310.0000.5618 |
Insured Liability |
Crime Insurance |
N/A |
$ 15,462 |
$ 13,992 |
737.1310.0000.5618 |
Privacy/Security Liability |
Network Liability |
N/A |
$ 98,855 |
$ 101,908 |
737.1310.0000.5618 |
Insured Liability |
Storage Tanks Ins. |
N/A |
$ 1,639 |
$ 1,639 |
635.4100.0000.5614 |
Airport Operating |
Public Liability |
N/A |
$ 11,485 |
$ 11,485 |
737.1310.0000.5610 |
Fine Arts |
Fire Insurance |
N/A |
$ 8,820 |
$ 8,820 |
737.1310.0000.5219 |
Other Professional Services |
Broker Fee |
N/A |
$ 27,000 |
$ 27,000 |
|
|
|
Total |
$2,308,258 |
$1,392,451 |
*This amount includes estimated premiums for the $25 million additional Excess Liability coverage ($826,000). It is anticipated that premiums will be less than or equal to the estimated, but we have not received the final premium amounts as of the date of this memorandum. |